Blue Ocean

Strategy

JOHN ABBOTT

JOHN ABBOTT

Prof Chan Kim

Prof Renee
Mauborgne

The Book and the Authors

Creating New Market Space

To win in the future New Market
Space, companies must stop
competing with each other.
Because the only way to beat the
competition is to stop trying to beat
the competition.

Two Oceans
RED OCEAN

BLUE OCEAN

Two Oceans

From Kim & Mauborgne, 2005

Red Ocean Strategy

Blue Ocean Strategy

Compete in existing
market space.

Create uncontested market

space.

Beat the competition.

Make the competition irrelevant.

Exploit existing demand.

Create and capture new

demand.

Make the value-cost trade- Break the value-cost trade-off.

off.
Align the whole system of
a strategic firm's activities
with its choice of
differentiation or low cost.

Align the whole system of a

firm's activities in pursuit of
differentiation and low cost.
VALUE INNOVATION

BOS Logic: The Core Principles

Reconstruct Market
Boundaries
overcome believes.
Reach beyond
existing Demand
go for uncontested space.
Get the strategic
sequence right
value [innovation] first.

COST

VI
VI
VALUE

BOS Logic: Reconstruct market boundaries

Boundaries of
Competition
Industry

Strategic Group

Head-to-Head
Competition
Focuses on rivals within its
industry
Focuses on competitive position
within strategic group

Creating
New Market Space
Looks across alternative
industries
Looks across strategic groups
within its industry

Focuses on better serving the

buyer group

Redefines the buyer group of the

industry

Scope of Product
and Service
Offerings

Focuses on maximizing the value

of product and service offerings
within the bounds of its industry

Looks across to complementary

product and service offerings that
go beyond the bounds of its
industry

Functional-emotional
Orientation of an
Industry

Focuses on improving priceperformance with the functionalemotional orientation of this

industry

Rethinks the functional-emotional

orientation of its industry

Buyer Group

Time/Trends

Focuses on adapting to external

trends as they occur

Participation in shaping external

trends over time

BOS Logic: Reach beyond existing demand

Core Customer

Soon-to-be-NC

Noncostumer

Refusing Customer

BOS Logic: Get the Strategic Sequence right

Buyer utility
Is there exceptional buyer
utility in your business idea?

No Rethink
YES
Price
Is your price easily accessible to
the mass of buyers?

YES

No Rethink

Cost
Can you attain your cost target to
profit at your strategic price?

No Rethink

YES
Adoption
What are the adoption hurdles in
actualizing your business idea?
Are you addressing them up
front?

YES

No Rethink

A commercially viable Blue Ocean Strategy

Which Strategy?
SUSTAINI
NG (RED)

From Kim & Mauborgne, 2005

VS.

DISRUPTIV
E (BLUE)

Compete in existing market

space

Create uncontested market space

Beat the competition

Make the competition irrelevant

Exploit existing demand

Create and capture new demand

Make the value/cost trade-off

Break the value/cost trade-off

Align the whole system of an

organizations activities with its
strategic choice of
differentiation OR low cost

Align the whole system of an

organizations activities in pursuit
of differentiation AND low cost.

Four
Actions to
create a
Blue Ocean

Raise
What factors
should be raised
well beyond the
industry standard?

From Kim & Mauborgne, 2005

Eliminate

Create

What factors
should be
eliminated that the
industry has taken
for granted?

What factors should

be created that the
industry has never
offered?

Reduce
What factors
should be reduced
well below the
industry standard?